<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________________ to __________________
Commission Registrant, State of Incorporation I.R.S. Employer
File Number Address and Telephone Number Identification No.
_______________________________________________________________________________
1-11255 AMERCO 88-0106815
(A Nevada Corporation)
1325 Airmotive Way, Ste. 100
Reno, Nevada 89502-3239
Telephone (775) 688-6300
2-38498 U-Haul International, Inc. 86-0663060
(A Nevada Corporation)
2727 N. Central Avenue
Phoenix, Arizona 85004
Telephone (602) 263-6645
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ].
22,614,087 shares of AMERCO Common Stock, $0.25 par value were
outstanding at February 10, 2000.
5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par
value, were outstanding at February 10, 2000. U-Haul International,
Inc. meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
<PAGE> 2
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
a) Consolidated Balance Sheets as of December 31, 1999 and
March 31, 1999................................................ 4
b) Consolidated Statements of Earnings for the Nine months ended
December 31, 1999 and 1998.................................... 6
c) Consolidated Statements of Changes in Stockholders' Equity
for the Nine months ended December 31, 1999................... 7
d) Consolidated Statements of Comprehensive Income for the
Nine months ended December 31, 1999 and 1998.................. 8
e) Consolidated Statements of Earnings for the Quarters ended
December 31, 1999 and 1998.................................... 9
f) Consolidated Statements of Cash Flows for the Nine months ended
December 31, 1999 and 1998.................................... 10
g) Notes to Consolidated Financial Statements - December 31, 1999,
March 31, 1999 and December 31, 1998.......................... 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 22
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 33
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 34
Item 6. Exhibits and Reports on Form 8-K.................................. 35
<PAGE> 3
THIS PAGE LEFT
INTENTIONALLY BLANK
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
December 31, March 31,
Assets 1999 1999
-------------------------
(Unaudited)
(in thousands)
Cash and cash equivalents $ 17,176 44,505
Trade receivables, net 172,399 173,050
Notes and mortgage receivables, net 219,556 217,910
Inventories, net 80,581 80,159
Prepaid expenses 10,363 16,363
Investments, fixed maturities 905,124 900,995
Investments, other 171,548 181,892
Deferred policy acquisition costs 82,990 63,283
Other assets 102,156 114,522
------------------------
Property, plant and equipment, at cost:
Land 196,582 196,960
Buildings and improvements 832,287 806,421
Furniture and equipment 248,205 234,894
Rental trailers and other rental
equipment 204,726 186,660
Rental trucks 1,019,165 992,418
------------------------
2,500,965 2,417,353
Less accumulated depreciation 1,164,814 1,122,529
------------------------
Total property, plant and equipment 1,336,151 1,294,824
------------------------
Total Assets $ 3,098,044 3,087,503
========================
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 5
December 31, March 31,
Liabilities and Stockholders' Equity 1999 1999
-------------------------
(Unaudited)
(in thousands, except
share and per share data)
Liabilities:
Accounts payable and accrued expenses $ 148,912 169,185
Notes and loans payable 1,101,824 1,114,748
Policy benefits and losses, claims and
loss expenses payable 517,422 546,599
Liabilities from premium deposits 457,677 457,759
Cash overdraft 36,163 28,169
Other policyholders' funds and liabilities 49,963 48,889
Deferred income 41,285 41,549
Deferred income taxes 96,462 64,580
------------------------
Stockholders' equity:
Serial preferred stock, with or without par
value, 50,000,000 shares authorized -
Series A preferred stock, with no par
value, 6,100,000 shares authorized;
6,100,000 issued and outstanding as of
December 31, 1999 and March 31, 1999 - -
Series B preferred stock, with no par
value, 100,000 shares authorized;
none and 25,000 shares outstanding
as of December 31, 1999 and
March 31, 1999, respectively - -
Serial common stock, with or without par
value, 150,000,000 shares authorized -
Series A common stock of $0.25 par
value, 10,000,000 shares authorized;
5,762,495 shares issued as of
December 31, 1999 and March 31, 1999 1,441 1,441
Common stock of $0.25 par value,
150,000,000 shares authorized;
36,487,505 shares issued as of
December 31, 1999 and March 31, 1999 9,122 9,122
Additional paid-in capital 275,242 299,905
Accumulated other comprehensive income (26,365) (17,740)
Retained earnings 768,031 703,322
------------------------
1,027,471 996,050
Less:
Cost of common shares in treasury, net
(19,635,913 shares as of
December 31, 1999 and March 31, 1999) 363,533 363,533
Unearned employee stock ownership
plan shares 15,602 16,492
------------------------
Total stockholders' equity 648,336 616,025
Contingent liabilities and commitments
------------------------
Total Liabilities and Stockholders' Equity $ 3,098,044 3,087,503
========================
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 6
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Nine months ended December 31,
(Unaudited)
1999 1998
-------------------------
(in thousands, except
share and per share data)
Revenues
Rental revenue $ 907,802 848,771
Net sales 148,669 143,169
Premiums 167,020 165,492
Net investment and interest income 61,341 53,664
-----------------------
Total revenues 1,284,832 1,211,096
Costs and expenses
Operating expenses 705,245 666,109
Cost of sales 87,737 84,568
Benefits and losses 126,944 130,468
Amortization of deferred acquisition costs 27,340 16,902
Lease expense 98,999 87,632
Depreciation, net 61,553 53,480
-----------------------
Total costs and expenses 1,107,818 1,039,159
Earnings from operations 177,014 171,937
Interest expense 61,038 55,003
-----------------------
Pretax earnings 115,976 116,934
Income tax expense (40,867) (41,055)
-----------------------
Net earnings $ 75,109 75,879
=======================
Earnings per common share:
Basic $ 2.95 2.85
Diluted $ 2.93 -
=======================
Weighted average common shares outstanding:
Basic 21,964,513 21,934,264
Diluted 22,353,402 -
=======================
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 7
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Nine months ended December 31,
(Unaudited)
1999
-------------------------
(in thousands, except
share and per share data)
Series A common stock of $0.25 par value:
10,000,000 shares authorized, 5,762,495
shares issued as of December 31, 1999
Beginning and end of period $ 1,441
-----
Common stock of $0.25 par value:
150,000,000 shares authorized, 36,487,505
shares issued as of December 31, 1999
Beginning and end of period 9,122
-----
Additional paid-in capital:
Beginning of period 299,905
Preferred stock repurchase (25,000)
Issuance of common shares under leveraged
employee stock ownership plan 337
-------
End of period 275,242
-------
Accumulated other comprehensive income:
Beginning of period (17,740)
Foreign currency translation 4,100
Fair market value of cash flow hedge 2,130
Unrealized loss on investments (14,855)
-------
End of period (26,365)
-------
Retained earnings:
Beginning of period 703,322
Net earnings 75,109
Preferred stock dividends paid:
Series A ($1.59 per share) (9,721)
Series B ($27.14 per share) (679)
-------
End of period 768,031
-------
Less Treasury stock:
Beginning and end of period 363,533
-------
Less Unearned employee stock
ownership plan shares:
Beginning of period 16,492
Purchase of shares 3
Repayments from loan (893)
-------
End of year 15,602
-------
Total stockholders' equity $ 648,336
=======
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 8
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Nine months ended December 31,
(Unaudited)
1999 1998
-------------------
(in thousands)
Comprehensive Income:
Net earnings $ 75,109 75,879
Changes in other comprehensive income:
Foreign currency translation 4,100 (6,420)
Fair market value of cash flow hedge 2,130 (4,819)
Unrealized gain (loss) on investments (14,855) 5,761
-------------------
Total Comprehensive Income $ 66,484 70,401
===================
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 9
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Quarters ended December 31,
(Unaudited)
1999 1998
--------------------------
(in thousands, except
share and per share data)
Revenues
Rental revenue $ 264,772 249,870
Net sales 38,548 35,602
Premiums 59,217 69,269
Net investment and interest income 19,959 18,378
------------------------
Total revenues 382,496 373,119
Costs and expenses
Operating expenses 240,870 217,535
Cost of sales 25,003 21,659
Benefits and losses 42,929 50,477
Amortization of deferred acquisition costs 9,459 8,103
Lease expense 34,787 31,100
Depreciation, net 23,002 21,578
------------------------
Total costs and expenses 376,050 350,452
Earnings from operations 6,446 22,667
Interest expense 21,223 18,368
------------------------
Pretax earnings (loss) (14,777) 4,299
Income tax benefit (expense) 5,452 (1,821)
------------------------
Net earnings (loss) $ (9,325) 2,478
========================
Loss per common share (both basic and
diluted $ (0.57) (0.07)
========================
Weighted average common shares outstanding: 21,975,889 21,942,190
========================
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 10
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine months ended December 31,
(Unaudited)
1999 1998
(in thousands)
-------------------
Cash flows from operating activities:
Net earnings $ 75,109 75,879
Depreciation and amortization 108,155 80,717
Provision for losses on accounts receivable 3,575 3,545
Net gain on sale of real and personal property (6,776) (681)
Net (gain) loss on sale of investments 84 (1,745)
Changes in policy liabilities and accruals (24,863) 7,368
Additions to deferred policy acquisition costs (35,773) (36,117)
Net change in other operating assets
and liabilities 19,423 (98,843)
-------------------
Net cash provided by operating activities 138,934 30,123
-------------------
Cash flows from investing activities:
Purchases of investments:
Property, plant and equipment (269,530) (235,035)
Fixed maturities (114,778) (141,792)
Common stock - (2,553)
Preferred stock (369) (20,700)
Mortgage loans (11,955) (1,582)
Proceeds from sale of investments:
Property, plant and equipment 167,305 196,506
Fixed maturities 87,604 177,162
Preferred stock 968 1,858
Real estate 827 5,196
Mortgage loans 8,382 14,661
Changes in other investments 12,295 (3,560)
-------------------
Net cash used by investing activities (119,251) (9,839)
-------------------
Cash flows from financing activities:
Net change in short-term borrowings 17,160 44,500
Proceeds from notes 150,000 -
Debt issuance costs (7,490) (378)
Leveraged Employee Stock Ownership Plan:
Purchase of shares (3) (201)
Repayments from loan 893 1,203
Principal payments on notes (180,084) (46,370)
Repurchase of preferred stock (25,000) (25,000)
Net change in cash overdraft 7,995 12,716
Preferred stock dividends paid (10,400) (13,479)
Investment contract deposits 45,435 56,217
Investment contract withdrawals (45,518) (46,149)
-------------------
Net cash used by financing activities (47,012) (16,941)
-------------------
Increase (decrease) in cash and cash equivalents (27,329) 3,343
Cash and cash equivalents at beginning of period 44,505 31,606
-------------------
Cash and cash equivalents at end of period $ 17,176 34,949
===================
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 11
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999, March 31, 1999 and December 31, 1998
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
AMERCO, a Nevada corporation (AMERCO), is the holding company for
U-Haul International, Inc. (U-Haul), Amerco Real Estate Company (Real
Estate), Republic Western Insurance Company (Republic) and Oxford Life
Insurance Company (Oxford).
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
parent corporation, AMERCO, and its wholly-owned subsidiaries. All
material intercompany accounts and transactions of AMERCO and its
subsidiaries have been eliminated. The financial statements and
notes are presented as permitted by Form 10-Q and do not contain
certain information included in AMERCO's annual financial statements
and notes.
The consolidated balance sheet as of December 31, 1999 and the
related consolidated statements of earnings for the three and nine
months ended December 31, 1999 and 1998, and the related consolidated
statements of changes in stockholders' equity for the nine months
ended December 31, 1999 and the consolidated statements of
comprehensive income and cash flows for the nine months ended December
31, 1999 and 1998 are unaudited; in the opinion of management, all
adjustments necessary for a fair presentation of such financial
statements have been included. Such adjustments consisted only of
normal recurring items. Interim results are not necessarily
indicative of results for a full year.
The operating results and financial position of AMERCO's
consolidated insurance operations are determined on a one quarter lag.
There were no effects related to intervening events which would
materially affect the consolidated financial position or results of
operations for the financial statements presented herein.
Certain reclassifications have been made to the financial
statements for the three and nine months ended December 31, 1998 to
conform with the current year's presentation.
<PAGE> 12
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
2. INVESTMENTS
A comparison of amortized cost to market for fixed maturities is as
follows:
September 30, 1999
------------------ Par Value Gross Gross Estimated
Consolidated or number Amortized unrealized unrealized market
Held-to-Maturity of shares cost gains losses value
------------------------------------------------------
(in thousands)
U.S. treasury
securities
and government
obligations $ 17,964 $ 18,894 117 (299) 18,712
U.S. government
agency mortgage-
backed securities $ 19,804 19,713 86 (275) 19,524
Obligations of
states and
political
subdivisions $ 1,500 1,517 82 - 1,599
Corporate
securities $ 98,970 103,647 1,832 (1,564) 103,915
Mortgage-backed
securities $ 37,118 37,354 331 (486) 37,199
Redeemable preferred
stocks 4,561 115,253 454 (9,373) 106,334
----------------------------------------
296,378 2,902 (11,997) 287,283
----------------------------------------
September 30, 1999
------------------ Par Value Gross Gross Estimated
Consolidated or number Amortized unrealized unrealized market
Available-for-Sale of shares cost gains losses value
------------------------------------------------------
(in thousands)
U.S. treasury
securities and
government
obligations $ 35,385 $ 36,135 1,231 (855) 36,511
U.S. government
agency mortgage-
backed securities $ 37,543 37,252 317 (444) 37,125
Obligations of
states and
political
subdivisions $ 13,350 13,514 519 (130) 13,903
Corporate
securities $ 459,757 461,768 4,567 (12,361) 453,974
Mortgage-backed
securities $ 35,242 34,997 1,075 (159) 35,913
Redeemable preferred
stocks 1,311 32,675 169 (1,524) 31,320
----------------------------------------
616,341 7,878 (15,473) 608,746
----------------------------------------
Total $ 912,719 10,780 (27,470) 896,029
========================================
<PAGE> 13
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES
A summarized consolidated balance sheet for Republic is presented below:
September 30,
-------------------
1999 1998
-------------------
(in thousands)
Investments, fixed maturities $ 413,845 407,755
Investments, other 22,942 23,720
Receivables 115,407 139,145
Deferred policy acquisition costs 12,720 8,472
Due from affiliate 23,772 24,831
Deferred federal income taxes 12,538 14,475
Other assets 17,847 24,821
-------------------
Total assets $ 619,071 643,219
===================
Policy liabilities and accruals $ 324,214 360,657
Unearned premiums 48,885 54,200
Other policyholders' funds and liabilities 29,872 21,272
-------------------
Total liabilities 402,971 436,129
Stockholder's equity 216,100 207,090
-------------------
Total liabilities and
stockholder's equity $ 619,071 643,219
===================
A summarized consolidated income statement for Republic is presented below:
Quarter ended Nine months ended
September 30, September 30,
------------------------------------------
1999 1998 1999 1998
------------------------------------------
(in thousands)
Premiums $ 35,721 39,476 100,289 104,737
Net investment income 8,141 8,979 24,830 27,221
----------------- ------------------
Total revenue 43,862 48,455 125,119 131,958
Benefits and losses 28,674 30,171 82,387 86,711
Amortization of deferred
policy acquisition costs 3,312 3,001 10,144 5,402
Operating expenses 7,775 7,649 23,511 25,693
----------------- ------------------
Total expenses 39,761 40,821 116,042 117,806
Income from operations 4,101 7,634 9,077 14,152
Federal income tax expense (1,217) (2,555) (2,783) (4,515)
----------------- ------------------
Net income $ 2,884 5,079 6,294 9,637
================= ==================
<PAGE> 14
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES,
continued
A summarized consolidated balance sheet for Oxford is presented below:
September 30,
--------------------
1999 1998
--------------------
(in thousands)
Investments, fixed maturities $ 491,279 471,015
Investments, other 129,900 115,010
Receivables 35,406 42,083
Deferred policy acquisition costs 70,270 54,925
Due from (to) affiliate (9,681) 3,046
Other assets 10,559 34,143
-------------------
Total assets $ 727,733 720,222
===================
Policy liabilities and accruals $ 141,995 155,735
Premium deposits 457,677 433,647
Other policyholders' funds and liabilities 23,191 22,147
Deferred federal income taxes 17,550 12,471
-------------------
Total liabilities 640,413 624,000
Stockholder's equity 87,320 96,222
-------------------
Total liabilities and
stockholder's equity $ 727,733 720,222
===================
A summarized consolidated income statement for Oxford is presented below:
Quarter ended Nine months ended
September 30, September 30,
------------------------------------------
1999 1998 1999 1998
------------------------------------------
(in thousands)
Premiums $ 24,334 35,087 71,541 71,389
Net investment income 5,673 5,046 15,811 14,486
----------------- -----------------
Total revenue 30,007 40,133 87,352 85,875
Benefits and losses 14,255 20,306 44,557 43,757
Amortization of deferred
policy acquisition costs 6,147 13,303 17,196 19,701
Operating expenses 5,809 3,567 15,337 12,707
----------------- -----------------
Total expenses 26,211 37,176 77,090 76,165
Income from operations 3,796 2,957 10,262 9,710
Federal income tax expense (1,180) (903) (3,352) (2,991)
----------------- -----------------
Net income $ 2,616 2,054 6,910 6,719
================= =================
In December 1998, North American Fire & Casualty Insurance Company
(NAFCIC) was sold to Republic.
<PAGE> 15
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
4. ACCUMULATED OTHER COMPREHENSIVE INCOME
<TABLE>
A summary of accumulated comprehensive income components follows:
<CAPTION>
Unrealized Fair market Accumulated
Foreign gain (loss) value of other
currency on cash flow comprehensive
translation investments hedge income
---------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balance at March 31, 1999 $ (25,411) 11,302 (3,631) (17,740)
Foreign currency
translation 4,100 - - 4,100
Fair market value of
cash flow hedge,
net of taxes of $1,195 - - 2,130 2,130
Unrealized gain (loss)
on investments,
net of taxes of $6,365 - (14,855) - (14,855)
------- ------- ------ -------
Balance at December 31, 1999 $ (21,311) (3,553) (1,501) (26,365)
======= ======= ====== =======
Balance at March 31, 1998 $ (18,675) 9,291 - (9,384)
Foreign currency
translation (6,420) - - (6,420)
Fair market value of
cash flow hedge,
net of taxes of $2,595 - - (4,819) (4,819)
Unrealized gain (loss)
on investments,
net of taxes of $2,262 - 5,761 - 5,761
------- ------- ------ -------
Balance at December 31, 1998 $ (25,095) 15,052 (4,819) (14,862)
======= ======= ====== =======
</TABLE>
5. CONTINGENT LIABILITIES AND COMMITMENTS
During the nine months ended December 31, 1999, a subsidiary of
U-Haul entered into fifteen transactions and has subsequently entered
into one transaction, whereby the subsidiary sold rental trucks and
subsequently leased them back. AMERCO has guaranteed $22,460,000 of
residual values at December 31, 1999 and an additional $1,571,000
subsequent to December 31, 1999 for these assets at the end of the
respective lease terms. Following are the lease commitments for the
leases executed during the nine months ended December 31, 1999, and
subsequently which have a term of more than one year (in thousands):
Net activity
Year ended Lease subsequent to
March 31, Commitments period end Total
--------------------------------------------------------
2000 $ 9,442 256 9,698
2001 16,220 1,533 17,753
2002 16,220 1,533 17,753
2003 16,220 1,533 17,753
2004 16,220 1,533 17,753
Thereafter 39,218 4,346 43,564
------------------------------------
$ 113,540 10,734 124,274
====================================
In the normal course of business, AMERCO is a defendant in a
number of suits and claims. AMERCO is also a party to several
administrative proceedings arising from state and local provisions
that regulate the removal and/or clean-up of underground fuel storage
tanks. It is the opinion of management that none of such suits,
claims or proceedings involving AMERCO, individually or in the
aggregate are expected to result in a material loss.
<PAGE> 16
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
6. SUPPLEMENTAL CASH FLOWS INFORMATION
The (increase) decrease in receivables, inventories and accounts
payable and accrued liabilities net of other operating and investing
activities follows:
Nine months ended
December 31,
1999 1998
-----------------------
(in thousands)
Receivables $ (3,394) (131,711)
=======================
Inventories $ (422) (2,004)
=======================
Accounts payable and
accrued liabilities $ (24,365) (52,556)
=======================
Income taxes paid in cash amounted to $638,000 and $1,065,000 for
the nine months ended December 31, 1999 and 1998, respectively.
Interest paid in cash amounted to $60,639,000 and $57,094,000 for
the nine months ended December 31, 1999 and 1998, respectively.
<PAGE> 17
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
7. EARNINGS PER SHARE
<TABLE>
The following table reflects the calculation of the earnings per share:
<CAPTION>
Weighted Average
Common Shares
Income Outstanding Per Share
(Numerator) (Denominator) Amount
----------- ---------------- ---------
(in thousands, except share and per share data)
<S> <C> <C> <C>
Quarter ended December 31, 1999:
Loss from operations $ (9,325)
Less dividends on preferred shares 3,241
-------
Basic and diluted loss per common share (12,566) 21,975,889 $ (0.57)
======= ========== ====
Quarter ended December 31, 1998:
Earnings from operations $ 2,478
Less dividends on preferred shares 4,046
-------
Basic and diluted loss per common share (1,568) 21,942,190 $ (0.07)
======= ========== ====
Nine months ended December 31, 1999:
Earnings from operations $ 75,109
Less dividends on preferred shares 10,259
-------
Basic earnings per common share 64,850 21,964,513 $ 2.95
Effect of dilutive securities -
Series B preferred shares 537 388,889
------ ----------
Diluted earnings per common share 65,387 22,353,402 $ 2.93
====== ========== ====
Nine months ended December 31, 1998:
Earnings from operations $ 75,879
Less dividends on preferred shares 13,292
------
Basic and diluted earnings per common share 62,587 21,934,264 $ 2.85
====== ========== ====
</TABLE>
<PAGE> 18
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
8. RELATED PARTIES
During the nine months ended December 31, 1999, subsidiaries of
AMERCO held various senior and junior notes with SAC Holding
Corporation and its subsidiaries (SAC Holdings). The voting common
stock of SAC Holdings is held by Mark V. Shoen, a major stockholder of
AMERCO.
AMERCO's subsidiaries received interest payments of $14,783,000
and principal payments of $29,456,000 from SAC Holdings during the
nine months ended December 31, 1999. The terms of the notes
receivable with SAC Holdings are consistent with the terms of notes
receivable held by U-Haul for other properties owned by unrelated
parties and managed by U-Haul.
U-Haul currently manages the properties owned by SAC Holdings
pursuant to a management agreement, under which U-Haul receives a
management fee equal to 6% of the gross receipts from the properties.
Management fees of $3,348,000 and $1,620,000 were received during the
nine months ended December 31, 1999 and 1998, respectively. The
management fee percentage is consistent with the fees received by
U-Haul for other properties owned by unrelated parties and managed by
U-Haul.
During the nine months ended December 31, 1999, a subsidiary of
AMERCO funded through a note receivable the purchase of properties and
construction costs for SAC Holdings of approximately $37,948,000.
Management believes that the foregoing transactions were
consummated on terms equivalent to those that prevail in arm's-length
transactions.
9. NEW ACCOUNTING STANDARDS
During fiscal year 1999, AMERCO adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". As of December 31, 1999, AMERCO recorded an
after tax adjustment of $2,130,000 to accumulated other comprehensive
income recognizing the fair value of derivatives designated as cash
flow hedges. AMERCO uses interest rate swap agreements to
potentially mitigate the impact of changes in interest rates on its
variable rate debt. For the nine months ended December 31, 1999,
AMERCO recognized $22,000 as interest income, representing the
ineffectiveness of the cash flow hedging activity.
Other pronouncements issued by the Financial Standards Board with
future effective dates are either not applicable or not material to
the consolidated financial statements of AMERCO.
<PAGE> 19
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
10. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA
Industry Segment Data - AMERCO has four industry segments
represented by Moving and Storage Operations (U-Haul), Real Estate,
Property and Casualty Insurance (Republic) and Life Insurance
(Oxford).
<TABLE>
Information concerning operations by industry segment follows:
<CAPTION>
Moving Property/ Adjustments
and Storage Real Casualty Life and
Operations Estate Insurance Insurance Eliminations Consolidated
-----------------------------------------------------------------------
(in thousands)
Nine months ended December 31, 1999
-----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Outside $ 1,069,592 7,579 121,254 86,407 - 1,284,832
Intersegment - 53,075 3,865 945 (57,885) -
---------- ------- ------- ------- -------- ---------
Total revenue $ 1,069,592 60,654 125,119 87,352 (57,885) 1,284,832
Depreciation/
amortization $ 62,278 7,664 10,529 27,684 - 108,155
Interest expense $ 61,038 30,926 - - (30,926) 61,038
Pretax earnings $ 78,245 18,392 9,077 10,262 - 115,976
Income tax $ (28,294) (6,438) (2,783) (3,352) - (40,867)
Identifiable
assets $ 1,385,918 705,396 619,071 727,733 (340,074) 3,098,044
</TABLE>
<TABLE>
<CAPTION>
Nine months ended December 31, 1998
-----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Outside $ 999,705 4,192 122,226 84,973 - 1,211,096
Intersegment - 54,466 9,732 902 (65,100) -
---------- ------- ------- ------- -------- ---------
Total revenue $ 999,705 58,658 131,958 85,875 (65,100) 1,211,096
Depreciation/
amortization $ 45,778 8,448 6,757 19,734 - 80,717
Interest expense $ 55,003 30,645 - - (30,645) 55,003
Pretax earnings $ 78,343 14,729 14,152 9,710 - 116,934
Income tax $ (28,394) (5,155) (4,515) (2,991) - (41,055)
Identifiable
assets $ 1,282,166 701,190 643,219 720,222 (345,689) 3,001,108
</TABLE>
<PAGE> 20
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
10. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA, continued
<TABLE>
<CAPTION>
Moving Property/ Adjustments
and Storage Real Casualty Life and
Operations Estate Insurance Insurance Eliminations Consolidated
-----------------------------------------------------------------------
(in thousands)
Quarter ended December 31, 1999
-------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Outside $ 307,882 1,583 43,347 29,684 - 382,496
Intersegment - 17,777 515 323 (18,615) -
-------- ------ ------ ------ ------- -------
Total revenue $ 307,882 19,360 43,862 30,007 (18,615) 382,496
Depreciation/
amortization $ 21,862 2,623 3,544 16,327 - 44,356
Interest expense $ 21,223 10,653 - - (10,653) 21,223
Pretax earnings $ (27,150) 4,476 4,101 3,796 - (14,777)
Income tax $ 9,812 (1,963) (1,217) (1,180) - 5,452
</TABLE>
<TABLE>
<CAPTION>
Quarter ended December 31, 1998
-------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Outside $ 288,112 1,713 43,474 39,820 - 373,119
Intersegment - 18,259 4,981 313 (23,553) -
-------- ------ ------ ------ ------- -------
Total revenue $ 288,112 19,972 48,455 40,133 (23,553) 373,119
Depreciation/
amortization $ 17,952 2,698 3,319 9,072 - 33,041
Interest expense $ 18,368 10,513 - - (10,513) 18,368
Pretax earnings $ (11,165) 4,873 7,634 2,957 - 4,299
Income tax $ 3,342 (1,705) (2,555) (903) - (1,821)
</TABLE>
<TABLE>
<CAPTION>
Geographic Area Data United United
(All amounts are in States Canada Consolidated States Canada Consolidated
U.S. $'s) -------------------------------- -----------------------------
Nine months ended Quarter ended
-------------------------------- -----------------------------
(in thousands)
December 31, 1999
-----------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues $ 1,256,619 28,213 1,284,832 375,137 7,359 382,496
Depreciation/
amortization $ 105,459 2,696 108,155 43,360 996 44,356
Interest expense $ 61,022 16 61,038 21,218 5 21,223
Pretax earnings $ 113,047 2,929 115,976 (13,930) (847) (14,777)
Income tax $ (40,867) - (40,867) 5,452 - 5,452
Identifiable assets $ 3,051,332 46,712 3,098,044 n/a n/a n/a
December 31, 1998
-----------------
Total revenues $ 1,186,216 24,880 1,211,096 366,629 6,490 373,119
Depreciation/
amortization $ 78,211 2,506 80,717 32,173 868 33,041
Interest expense $ 54,994 9 55,003 18,366 2 18,368
Pretax earnings $ 115,062 1,872 116,934 4,444 (145) 4,299
Income tax $ (41,055) - (41,055) (1,821) - (1,821)
Identifiable assets $ 2,961,188 39,920 3,001,108 n/a n/a n/a
</TABLE>
<PAGE> 21
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
11. SUBSEQUENT EVENTS
On January 10, 2000, the United States Supreme Court denied review of the
Bankruptcy Court's ruling that the plaintiffs (non-management members of the
Shoen family and their affiliates) are entitled to interest related to a
previous resolution of a long-standing legal dispute involving the Shoen
family and related to control of AMERCO. In 1996, AMERCO deposited
approximately $48.2 million into an escrow account to secure payment of the
disputed interest, pending final resolution of this issue. The escrow account
is reflected as a component of "Other assets" in AMERCO's consolidated
financial statements. The amount deposited into the escrow account will be
transferred to the plaintiffs in the near future. The release of the escrow
will not have the effect of increasing or decreasing AMERCO's net earnings,
but will reduce stockholders' equity.
On February 4, 2000, AMERCO issued $200,000,000 of 8.80% Senior Notes
due 2005.
On February 8, 2000, AMERCO declared a cash dividend of $3,241,000
($0.53125 per preferred share) to preferred stockholders of record as of
February 18, 2000.
<PAGE> 22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. Additional
written or oral forward-looking statements may be made by AMERCO from
time to time in filings with the Securities and Exchange Commission or
otherwise. Management believes such forward-looking statements are
within the meaning of the safe-harbor provisions. Such statements may
include, but not be limited to, projections of revenues, income or
loss, estimates of capital expenditures, plans for future operations,
products or services and financing needs or plans, as well as
assumptions relating to the foregoing. The words "believe", "expect",
"anticipate", "estimate", "project" and similar expressions identify
forward-looking statements, which speak only as of the date the
statement was made. Forward-looking statements are inherently subject
to risks and uncertainties, some of which cannot be predicted or
quantified. Future events and actual results could differ materially
from those set forth in, contemplated by or underlying the forward-
looking statements. The following disclosures, as well as other
statements in AMERCO's report and in the Notes to AMERCO's
Consolidated Financial Statements, describe factors, among others,
that could contribute to or cause such differences, or that could
affect AMERCO's stock price.
GENERAL
Information on industry segments is incorporated by reference
from "Item 1. Financial Statements - Notes 1, 3 and 10 of Notes to
Consolidated Financial Statements". The notes discuss the principles
of consolidation, summarized consolidated financial information and
industry segment and geographical area data, respectively. In
consolidation, all intersegment premiums are eliminated and the
benefits, losses and expenses are retained by the insurance companies.
RESULTS OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 1999 VERSUS NINE MONTHS ENDED
DECEMBER 31, 1998
Moving and Storage Operations
Revenues consist of rental revenues and net sales. Total rental
revenue was $907.8 million and $848.8 million for the nine months
ended December 31, 1999 and 1998, respectively. Net revenues from the
rental of moving related equipment increased by $56.5 million. This
increase is primarily attributable to higher truck rental revenues.
The growth in truck rental revenue primarily reflects improved
utilization, an increase in the average revenue per transaction and
higher truck rental inventory.
Net sales revenues were $148.7 million and $143.2 million for the
nine months ended December 31, 1999 and 1998, respectively. Revenue
growth from propane sales, which was up by 10.2% during the nine
months ended December 31, 1999, and from the sale of moving support
items (i.e. boxes, etc.), which was up by 3.5% during the nine months
ended December 31, 1999, led to the improvement.
Cost of sales was $87.7 million and $84.6 million for the nine
months ended December 31, 1999 and 1998, respectively. A higher sales
volume contributed to the increase.
Operating expenses before intercompany eliminations increased to
$721.0 million for the nine months ended December 31, 1999 from $679.9
million for the nine months ended December 31, 1998. Increased
expenditure levels for rental equipment maintenance and personnel, due
to an increase in truck rental transactions and in fleet size, were
primarily responsible.
Lease expense was $97.7 million and $87.5 million for the nine
months ended December 31, 1999 and 1998, respectively. This increase
reflects additional leasing activity over the past twelve months.
Net depreciation expense for the nine months ended December 31,
1999 was $54.8 million, as compared to $45.0 million in the same
period of the prior year. The increase reflects an increase in
depreciation recognized on the rental truck fleet.
<PAGE> 23
Real Estate Operations
Rental revenue before intercompany eliminations was $55.0 million
and $56.1 million for the nine months ended December 31, 1999 and
1998, respectively. Intercompany revenue was $53.1 million and $54.5
million for the nine months ended December 31, 1999 and 1998,
respectively.
Net investment and interest income was $5.7 million for the nine
months ended December 31, 1999 as compared to $2.5 million during the
same period of the prior year. This increase correlates to a significant
increase in average note and mortgage receivables outstanding.
Operating expenses were $3.2 million for the nine months ended
December 31, 1999 versus $4.7 million for the nine months ended
December 31, 1998. Reduced building maintenance expense accounted for
the majority of the decline from the prior year.
Lease expense for the nine months ended December 31, 1999 and 1998 was
$1.3 million and $0.1 million, respectively. The increase reflects payments
under a synthetic lease facility being utilized to develop storage properties.
Net depreciation expense for the nine months ended December 31, 1999 was
$6.8 million, as compared to $8.5 million in the same period of the prior year.
The decrease reflects higher gains from the disposition of property and lower
levels of depreciable assets.
Property and Casualty
Republic's premiums were $100.3 million and $104.7 million for the nine
months ended September 30, 1999 and 1998, respectively. The decrease in
premium for 1999 as compared to 1998 resulted from the U-Haul Liability
programs in the rental industry, which decreased to $35.6 million from $50.9
million, respectively. This decrease resulted from the restructuring of the
U-Haul Business Auto General Liability policy. The deductible was changed at
April 1, 1999 from a flat deductible to a 95% deductible. This reduced
premiums by $14.5 million for the nine months ended September 30, 1999 as
compared to 1998. The impact of this change will result in an overall savings
of $0.6 million in premium taxes for 1999. Additionally, assumed treaty
reinsurance increased to $35.0 million for the nine months ended
September 30, 1999 as compared to $34.0 million for the nine months ended
September 30, 1998. Direct multiple peril and general agency premium increased
to $17.9 million and $11.6 million, respectively, for the nine months ended
September 30, 1999 compared to $15.2 million and $4.6 million, respectively,
for the nine months ended September 30, 1998.
Net investment income was $24.8 million and $27.2 million for the
nine months ended September 30, 1999 and 1998, respectively. The
decrease from 1998 to 1999 is attributable to a decrease in invested
assets and a lower yield on reinvested funds.
Benefits and losses were $82.4 million and $86.7 million for the
nine months ended September 30, 1999 and 1998, respectively. The
decrease from 1998 to 1999 resulted from a decrease in the U-Haul
Liability programs for unpaid reported claims corresponding to the
decrease in premiums mentioned above.
Deferred acquisition costs (DAC) consist of commissions and
other costs, which vary with and are primarily related to the
production of new business. The prior year commissions, and other
related expenses, are amortized over the following year. The
amortization expenses for the nine months ended September 30, 1999 and
1998 were $10.1 million and $5.4 million, respectively. The
increase from 1998 to 1999 is due mainly to Republic's subsidiary
company's DAC expense, which increased to $3.0 million for the nine
months ended September 30, 1999 from a negligible amount for the nine
months ended September 30, 1998. Also contributing was a $1.4 million
increase in the nonaffiliated agents expense. The Field Underwriting
and Mobile Home programs increased due to 1998 written and unearned
premiums and the Excess Worker's Compensation program increased due to
1998 commission expenses relating to a settlement agreement with the
previous general agent.
Operating expenses were $23.5 million and $25.7 million for
the nine months ended September 30, 1999 and 1998, respectively.
Commissions decreased to $12.0 million for the nine months ended
September 30, 1999 compared to $14.9 million for the nine months ended
September 30, 1998. This is mainly attributable to Republic's
subsidiary's DAC earned for the nine months ended September 30, 1999.
This subsidiary was purchased in December 1998; therefore, there was
no DAC included for this subsidiary for the nine months ended
September 30, 1998. Additionally, there was an increase in the
nonaffiliated agents and assumed treaty reinsurance DAC earned
relating to the increase in the DAC expense mentioned above. Slightly
offsetting were increased lease expenses of $1.4 million and $0.8
million for the nine months ended September 30, 1999 and 1998,
respectively. All other underwriting expenses were $10.1 million and
$10.0 million for the nine months ended September 30, 1999 and 1998,
respectively.
<PAGE> 24
Operating profit before tax and intercompany elimination was $9.1
million and $14.1 million for the nine months ended September 30, 1999
and 1998, respectively. This represents a decrease in 1999 of $5.0
million from 1998 and resulted mainly from decreased premium revenue
and investment income.
Life Insurance
Net premiums were $71.5 million and $71.4 million for the nine
months ended September 30, 1999 and 1998, respectively. Oxford
realized premium increases in the areas of Medicare supplement, credit
life and disability and single premium whole life insurance products.
Oxford increased Medicare supplement premium through the reinsurance
of a block of policies and by adding direct premium through new
programs; these increased premiums by $6.1 million. Oxford began
marketing a new single premium whole life policy in 1998; this product
accounted for $2.9 million of new premiums in 1999 over 1998. With the
sale of NAFCIC, credit insurance premiums decreased by $4.3 million.
As expected, premiums decreases occurred in non-essential NAI lines that
were terminated and due to fewer annuitizations. These changes accounted
for a $4.7 million decrease in premiums through the first nine months of 1999.
Net investment income before intercompany eliminations was $15.8
million and $14.5 million for the nine months ended September 30, 1999
and 1998, respectively. This increase is due to the increase in the
average invested assets for the year, which was the result of new
premium in 1999 and the increased asset base from the acquisition of
NAI and Safe Mate.
Benefits incurred were $44.6 million and $43.8 million for the
nine months ended September 30, 1999 and 1998, respectively. This
increase is primarily due to Medicare supplement benefits incurred.
These benefits are related to the new business recorded in 1998. The
new Medicare supplement reinsurance accounted for $3.7 million of
benefit variance. Annuity benefits combined with the elimination of
non-focused NAI health lines reduced benefits by $2.9 million.
Amortization of DAC and the value of business acquired (VOBA) was
$17.2 million and $19.7 million for the nine months ended September
30, 1999 and 1998, respectively. Oxford defers commissions and other
policy acquisition costs on single premium business. These costs are
amortized as the premium is earned over the term of the policy.
Oxford continues to increase its single premium credit business in
force, thus increasing both the deferred costs on the balance sheet
and the subsequent amortization. After Oxford purchased NAI in 1997,
Oxford began dynamically amortizing the VOBA asset recognized at
purchase. This asset relates to the future profits of the credit
insurance policies in force at the time of purchase. The amortization of
this asset led to higher 1998 amortization amounts. In 1999, Oxford did
not have amortization charges related to NAFCIC that were present in 1998.
Operating expenses were $15.3 million and $12.7 million for the
nine months ended September 30, 1999 and 1998, respectively.
Commissions have increased $1.5 million in 1999 in proportion to the
increase in new premium. Operating expenses, still within budgeted
expectations, have increased in 1999 due to the expansion of business
volume.
Operating profit before tax and intercompany eliminations was
$10.3 million and $9.7 million for the nine months ended September 30, 1999
and 1998, respectively. The increase over the prior year reflects improved
investment returns, a result of a higher asset base from new business and
acquisitions, improving loss ratios on the Medicare supplement business and
better than expected loss experience for the credit business.
Interest Expense
Interest expense was $61.0 million for the nine months ended
December 31, 1999, as compared to $55.0 million for the nine months
ended December 31, 1998. The increase can be attributed to an
increase in average debt outstanding and a modest increase in the
average cost of debt.
<PAGE> 25
Consolidated Group
As a result of the foregoing, pretax earnings of $116.0 million
were realized in the nine months ended December 31, 1999, as compared
to $116.9 million for the same period in 1998. After providing for
income taxes, net earnings for the nine months ended December 31, 1999
were $75.1 million, as compared to $75.9 million for the same period
of the prior year.
QUARTERLY RESULTS
The following table presents unaudited quarterly results for the
eleven quarters in the period beginning April 1, 1997 and ending
December 31, 1999. AMERCO believes that all necessary adjustments
have been included in the amounts stated below to present fairly, and
in accordance with generally accepted accounting principles, its
results. U-Haul moving and storage operations are seasonal and
proportionally more of AMERCO's revenues and net earnings from its
U-Haul moving and storage operations are generated in the first and
second quarters of each fiscal year (April through September). The
operating results for the periods presented are not necessarily
indicative of results for any future period.
Quarter Ended
----------------------------------
Jun 30 Sep 30 Dec 31
1999 1999 1999
----------------------------------
(in thousands, except
share and per share data)
Total revenues $ 439,640 462,696 382,496
Net earnings (loss) 42,307 42,127 (9,325)
Weighted average common
shares outstanding
Basic 21,953,199 21,964,452 21,975,889
Diluted 22,953,199 22,131,119 -
Net earnings
per common share (1) (6)
Basic 1.77 1.77 (0.57)
Diluted 1.70 1.76 -
Quarter Ended
----------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
1998 1998 1998 1999
----------------------------------------------
(in thousands, except share and per share data)
Total revenues $ 393,744 444,233 373,119 343,683
Net earnings (loss) 31,230 42,171 2,478 (13,370)
Weighted average common
shares outstanding 21,924,749 21,935,854 21,942,190 21,947,951
Net earnings (loss) per
common share (both basic
and diluted) (1) (6) 1.21 1.71 (0.07) (0.78)
<PAGE> 26
Quarter Ended
----------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
1997 1997 1997 1998
----------------------------------------------
(in thousands, except share and per share data)
Total revenues $ 371,180 416,374 323,598 314,104
Earnings (loss) from operations
before extraordinary loss
on early extinguishment
of debt (2) (3) (4) (5) 29,198 39,032 (5,390) (14,184)
Net earnings (loss) (2) (3)
(4) (5) 29,198 34,894 (15,236) (13,872)
Weighted average common
shares outstanding 21,879,156 21,890,072 21,901,521 21,913,654
Earnings (loss) from operations
before extraordinary loss
on early extinguishment
of debt per common share
(2) (3) (4) (5) (6) 1.09 1.54 (0.49) (0.85)
Net earnings (loss) per
common share (both basic
and diluted) (1) (2) (3)
(4) (5) (6) 1.09 1.35 (0.94) (0.84)
_______________
(1) Net earnings (loss) per common share amounts were computed after giving
effect to the dividends on AMERCO's Preferred Stock.
(2) Reflects the adoption of Statement of Position 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use" during
the fourth quarter of fiscal year 1998.
(3) Reflects the change in estimated residual values during the fourth quarter
of fiscal year 1998.
(4) During the second quarter of fiscal year 1998, AMERCO extinguished
$76.0 million of 10.27% interest-bearing notes originally due in fiscal
year 1999 through fiscal year 2002. This resulted in an extraordinary loss
of $4.0 million, net of tax of $2.4 million ($0.18 per share).
(5) During the third quarter of fiscal year 1998, AMERCO extinguished
$255.0 million of 6.43% to 8.13% interest-bearing notes originally due in
fiscal year 1999 through fiscal year 2010. This resulted in an
extraordinary loss of $9.7 million, net of tax of $5.6 million
($0.44 per share).
(6) Reflects the redemption of $25 million, $50 million and $25 million of
Series B preferred stock in fiscal years 2000, 1999 and 1998, respectively.
<PAGE> 27
QUARTER ENDED DECEMBER 31, 1999 VERSUS QUARTER ENDED DECEMBER 31, 1998
Moving and Storage Operations
Revenues consist of rental revenues and net sales. Rental
revenue was $264.8 million and $249.9 million in the quarters ended
December 31, 1999 and 1998, respectively. This reflects a $14.9
million increase in revenues from the rental of moving related
equipment due to improved truck utilization, higher average revenue
per transaction and higher truck rental inventory.
Net sales revenues were $38.5 million in the quarter ended
December 31, 1999 as compared to net sales of $35.6 million in the
quarter ended December 31, 1998. Revenue growth from the sale of
propane and hitches led to the majority of the increase during the
quarter.
Cost of sales was $25.0 million in the quarter ended December 31, 1999,
which represents an increase from $21.7 million for the same period of the
prior year. Increased material costs and a higher sales volume contributed
to the increase.
Operating expenses before intercompany elimination increased to
$244.6 million in the quarter ended December 31, 1999 from $219.9
million in the quarter ended December 31, 1998. The increase reflects
higher personnel and rental equipment maintenance expenditures
associated with an increase in truck rental transactions and inventory
levels. Also contributing was an increase in advertising expense as providers
shifted the publish dates of several directories to December 1999 to avoid
possible Y2K problems.
Lease expense was $34.1 million and $31.1 million for the quarters
ended December 31, 1999 and 1998, respectively. The increase reflects
additional leasing activity.
Net depreciation expense for the quarter ended December 31, 1999
was $20.8 million, as compared to $18.7 million in the same period of
the prior year. The increase reflects an increase in depreciation
recognized on the rental truck fleet.
Real Estate Operations
Rental revenue before intercompany eliminations was $18.4 million
in the quarter ended December 31, 1999, compared to $18.9 million in
the quarter ended December 31, 1998. Intercompany revenue was $17.8
million as compared to $18.3 million in the prior year's third quarter.
Net investment and interest income was $0.9 million in the
quarter ended December 31, 1999 as compared to $1.1 million in the
quarter ended December 31, 1998.
Operating expenses were $1.3 million in the quarter ended
December 31, 1999 versus $1.7 million in the quarter ended December 31, 1998.
Reduced building maintenance expense accounted for the majority of the decline
from the prior year.
Lease expense was $0.7 million during the quarter ended December 31, 1999
versus a negligible amount during quarter ended December 31, 1998. The
increase reflects payments under a synthetic lease facility being utilized to
develop storage properties.
Net depreciation expense for the quarter ended December 31, 1999
was $2.1 million, as compared to $2.8 million in the same period of the prior
year. The decrease reflects higher gains from the disposition of property.
<PAGE> 28
Property and Casualty
Republic's premiums were $35.7 million and $39.5 million for the
quarters ended September 30, 1999 and 1998, respectively. The premium
decrease in 1999 compared to 1998 resulted from the U-Haul Liability
programs in the rental industry, which decreased to $11.7 million from
$22.2 million, respectively. This decrease resulted from the
restructuring of the U-Haul Business Auto General Liability policy.
The deductible was changed at April 1, 1999 from a flat deductible to
a 95% deductible. This reduced premiums by $10.9 million for the
quarter ended September 30, 1999 as compared to 1998. The result of
this change will result in an overall savings of $0.6 million in
premium taxes for 1999. Assumed treaty reinsurance increased to
$14.1 million for the quarter ended September 30, 1999 as compared to
$10.5 million for the quarter ended September 30, 1998. Direct multiple
peril was $5.2 million and $5.4 million for the quarters ended
September 30, 1999 and 1998, respectively. General agency premiums totaled
$3.4 million and $1.4 million for the quarters ended September 30, 1999
and 1998, respectively.
Net investment income was $8.1 million and $9.0 million for the
quarters ended September 30, 1999 and 1998, respectively. The
decrease from 1998 to 1999 resulted from a decrease in invested assets
and a lower yield.
Benefits and losses incurred were $28.7 million and $30.2 million
for the quarters ended September 30, 1999 and 1998, respectively. The
decrease from 1998 to 1999 is due to a decrease in the U-Haul
Liability programs for unpaid unreported claims corresponding to the
decrease in premiums mentioned above.
DAC consists of commissions and other costs, which vary with and
are primarily related to the production of new business. The prior
year commissions, and other related expenses, are amortized over
the following year. Amortization expenses was $3.3 million and $3.0
million for the quarters ended September 30, 1999 and 1998,
respectively. The increase from 1998 to 1999 is mainly due to
Republic's subsidiary company's DAC expenses, which increased to $1.1
million for the quarter ended September 30, 1999 from a negligible
amount for the quarter ended September 30, 1998. Offsetting this
increase were decreases in assumed treaty reinsurance of $0.5 million
and in nonaffiliated agents of $0.1 million.
Operating expenses were $7.8 million and $7.6 million for the
quarters ended September 30, 1999 and 1998, respectively. Commissions
increased slightly to $3.5 million for the quarter ended September 30, 1999
compared to $3.3 million for the quarter ended September 30, 1998. Lease
expenses increased to $0.5 million for the quarter ended September 30, 1999
as compared to $0.4 million for the quarter ended September 30, 1998.
All other underwriting expenses were $3.8 million and $3.9 million
for the quarters ended September 30, 1999 and 1998, respectively.
Operating profit before tax and intercompany elimination was $4.1
million and $7.6 million for the quarters ended September 30, 1999 and
1998, respectively. This represents a decrease in 1999 of $3.5
million from 1998 and resulted mainly from decreased premium revenue
and investment income, offset slightly by decreased underwriting expenses.
Republic's operating profit will exceed fourth quarter expectations.
<PAGE> 29
Life Insurance
Net premiums were $24.3 million and $35.1 million for the quarters
ended September 30, 1999 and 1998, respectively. Oxford realized a
premium decrease in the areas of Medicare supplement business. In the third
quarter of 1998, Oxford acquired a block of Medicare supplement policies
through the reinsurance. Through the acquisition accounting for this
transaction, Oxford recognized the transferred reserves as premium in the
quarter; this accounts for $7.6 million of the variance. Production sales of
Oxford's new single premium whole life policy increased by $0.6 million in the
third quarter compared to 1998. These increases were offset by fewer
reinsurance annuitizations in 1999 than in 1998, leading to $0.8 million less
in annuity premium. Credit life and disability premiums decreased by
$2.3 million for the quarter as a result of Oxford's sale of its NAFCIC
subsidiary. In addition, there were $0.7 million in premium decreases for
the third quarter resulting from the planned termination of NAI products not
part of Oxford's strategic focus.
Net investment income before intercompany eliminations was $5.7
million and $5.0 million for the quarters ended September 30, 1999 and
1998, respectively. This increase is due to a larger invested base.
Benefits incurred were $14.3 million and $20.3 million for the
quarters ended September 30, 1999 and 1998, respectively. The
decrease relates to the Medicare supplement assumption mentioned above.
These benefits accounted for $7.4 million of the decrease. Related to
the decrease in annuitizations in 1999 from 1998, annuity benefits
decreased $0.5 million. Benefits related to life insurance increased
to $0.5 million from 1998 due to increased production in single
premium whole life product. Other Medicare supplement benefits
increased $0.5 million for the quarter. Credit insurance benefits
increased by $0.9 million for the quarter.
Amortization of DAC and VOBA was $6.1 million and $13.3 million
for the quarters ended September 30, 1999 and 1998, respectively.
Oxford defers commissions and other policy acquisition costs on single
premium business. These costs are amortized as the premium is earned
over the term of the policy. Oxford continues to increase its single
premium credit business in force, thus increasing both the deferred
costs on the balance sheet and the subsequent amortization. After
Oxford purchased NAI in 1997, Oxford began dynamically amortizing the
VOBA asset recognized at the time of purchase. The amortization curve
decreases as the underlying profits are recognized. This asset
relates to the future profits of the credit insurance policies in
force at the time of purchase. In addition, the amortization charge
decreased due to the sale of NAFCIC.
Operating expenses were $5.8 million and $3.6 million for the
quarters ended September 30, 1999 and 1998, respectively. Operating
expenses for the quarter increased by $0.2 million stemming from the
administration costs associated with new reinsurance contracts.
Oxford's intercompany interest charges increased by $0.2 million for
the outstanding surplus notes due AMERCO. Other increases resulted
from new product development activities.
Operating profit before tax and intercompany eliminations was
$3.8 million and $3.0 million for the quarters ended September 30, 1999 and
1998, respectively. The increase stems from improved investment income
performance for the quarter.
Interest Expense
Interest expense was $21.2 million for the quarter ended December 31, 1999,
as compared to $18.4 million for the quarter ended December 31, 1998. The
increase can be attributed to a higher level of average debt outstanding.
Consolidated Group
As a result of the foregoing, a pretax loss of $14.8 million was
recognized during the quarter ended December 31, 1999, as compared to
pretax earnings of $4.3 million for the same period in 1998. After
providing for income taxes, the net loss for the quarter ended
December 31, 1999 was $9.3 million, as compared to net earnings of
$2.5 million for the same period of the prior year.
<PAGE> 30
LIQUIDITY AND CAPITAL RESOURCES
Moving and Storage Operations
To meet the needs of its customers, U-Haul must maintain a large
inventory of fixed asset rental items. At December 31, 1999, net
property, plant and equipment represented approximately 63.9% of total
assets from non-insurance operations and approximately 43.1% of
consolidated assets. In the nine months ended December 31, 1999,
capital expenditures were $269.5 million, as compared to $235.0
million in the nine months ended December 31, 1998. These
expenditures primarily reflect the expansion of the rental truck
fleet. The capital required to fund these acquisitions was obtained
through internally generated funds from operations and through lease
financings.
Cash flow from operations was $131.9 million in the nine months
ended December 31, 1999, as compared to $65.8 million in the nine
months ended December 31, 1998. The increase results from a
combination of earnings growth, higher levels of depreciation and
amortization and changes in other operating assets and liabilities.
At December 31, 1999, total outstanding notes and loans payable
was $1,101.8 million as compared to $1,114.7 million at March 31, 1999.
Real Estate Operations
Cash provided by operating activities was $10.7 million for the
nine months ended December 31, 1999. Cash used by operating
activities was $7.4 million for the nine months ended December 31, 1998.
The increase resulted from a combination of increased earnings
and changes in other operating assets and liabilities.
Property and Casualty
Cash flows used by operating activities were $9.2 million and
$29.6 million for the nine months ended September 30, 1999 and 1998,
respectively. The 1999 to 1998 change resulted from decreased paid
losses recoverable, decreased accounts receivable and a smaller
increase in funds withheld. Offsetting this increase in cash was a
decrease in unearned premium reserves.
Republic's cash and cash equivalents and short-term investment
portfolio were $1.4 million and $9.3 million at September 30, 1999 and
1998, respectively. The decrease from 1998 to 1999 resulted from the
timing difference of maturities/calls being reinvested. This level of
liquid assets, combined with budgeted cash flow, is adequate to meet
periodic needs. Capital and operating budgets allow Republic to
schedule cash needs in accordance with investment and underwriting
proceeds.
Republic maintains a diversified securities investment portfolio,
primarily in bonds, at varying maturity levels with 94.1% of the fixed-
income securities consisting of investment grade securities. The
maturity distribution is designed to provide sufficient liquidity to
meet future cash needs. Current liquidity remains strong with current
invested assets equal to 108.4% of total liabilities.
The liability for reported and unreported losses are based upon
company historical and industry averages. Unpaid loss adjustment
expenses are based on historical ratios of loss adjustment expenses
paid to losses paid. Unpaid loss and loss expenses are not
discounted.
Stockholder's equity was $216.1 million and $207.1 million at
September 30, 1999 and 1998, respectively. Republic considers current
stockholder's equity to be adequate to support future growth and
absorb unforeseen risk events. Republic does not use debt or equity
issues to increase capital and therefore has no exposure to capital
market conditions.
<PAGE> 31
Life Insurance
Oxford's primary sources of cash are premiums, receipts from
interest-sensitive products and investment income. The primary uses
of cash are operating costs and benefit payments to policyholders.
Matching the investment portfolio to the cash flow demands of the
types of insurance being written is an important consideration.
Benefit and claim statistics are continually monitored to provide
projections of future cash requirements.
Cash flows provided by operating activities were $5.6 million and
$11.3 million for the nine months ended September 30, 1999 and 1998,
respectively. Cash flows provided/(used) by financing activities were
approximately $(0.1) million and $10.1 million for the nine months
ended September 30, 1999 and 1998, respectively. Cash flows from
deferred annuity sales increase investment contract deposits, which
are a component of financing activities, as well as the purchase of
fixed maturities, which are a component of investing activities. The
decrease in cash flows provided by financing activities for the first
nine months of 1999 compared to the first nine months of 1998 is due
to lower ratio of annuity deposits to withdrawals.
In addition to cash flows from operating and financing
activities, a substantial amount of liquid funds is available through
Oxford's short-term portfolio. At September 30, 1999 and 1998, short-
term investments were $52.1 million and $32.3 million, respectively.
Management believes that the overall sources of liquidity will
continue to meet foreseeable cash needs.
Stockholder's equity of Oxford decreased to $87.3 million in 1999
from $96.2 million in 1998. The decrease is a result of the
unrealized losses on the available for sale investment portfolio.
Oxford did not pay dividends in 1999 or 1998.
Applicable laws and regulations of the State of Arizona require
AMERCO's insurance subsidiaries to maintain minimum capital and
surplus determined in accordance with statutory accounting practices.
With respect to Oxford, the amount is $450,000. In addition, the
amount of dividends that can be paid to shareholders by insurance
companies domiciled in the State of Arizona is limited. Any dividend
in excess of the limit requires prior regulatory approval. Statutory
surplus which can be distributed as dividends without regulatory
approval is $0.7 million at September 30, 1999. These restrictions
are not expected to have a material adverse effect on the ability of
AMERCO to meet its cash obligations.
Consolidated Group
During each of the fiscal years ended March 31, 2000, 2001 and
2002, U-Haul estimates gross capital expenditures will average
approximately $325 million primarily reflecting rental fleet rotation.
This level of capital expenditures, combined with an average of
approximately $30-$115 million in annual long-term debt maturities
during this same period, are expected to create annual average funding
needs of approximately $355-$440 million. Management estimates that U-Haul
will fund 100% of these requirements with internally generated funds, including
proceeds from the disposition of older trucks and other asset sales.
Credit Agreements
AMERCO's operations are funded by various credit and financing
arrangements, including unsecured long-term borrowings, unsecured
medium-term notes and revolving lines of credit with domestic and
foreign banks. Principally to finance its fleet of trucks and
trailers, AMERCO routinely enters into sale and leaseback
transactions. As of December 31, 1999, AMERCO had $1,101.8 million in
total notes and loans payable outstanding and unutilized lines of
credit of approximately $61.0 million.
Certain of AMERCO's credit agreements contain restrictive
financial and other covenants, including, among others, covenants with
respect to incurring additional indebtedness, maintaining certain
financial ratios and placing certain additional liens on its
properties and assets. At December 31, 1999, AMERCO was in compliance
with these covenants.
AMERCO is further restricted in the issuance of certain types of
preferred stock. AMERCO is prohibited from issuing shares of
preferred stock that provide for any mandatory redemption, sinking
fund payment, or mandatory prepayment, or that allow the holders
thereof to require AMERCO or any subsidiary of AMERCO to repurchase
such preferred stock at the option of such holders or upon the
occurrence of any event or events without the consent of its lenders.
Reference is made to Note 5 of Notes to Consolidated Financial Statements
in AMERCO's Annual Report on Form 10-K for the fiscal year ended March 31, 1999
for additional information about the credit agreements.
<PAGE> 32
Year 2000 Disclosure
In preparation for any potential Year 2000 processing problems,
AMERCO worked since 1997 to identify any changes necessary to its
existing computerized business systems to make these systems compliant
for Year 2000 processing. AMERCO has spent approximately $2.8 million
to date in its Year 2000 compliance efforts. Since January 1, 2000,
AMERCO has been assessing its information technology systems and has
found no major Year 2000 processing problems.
<PAGE> 33
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to Part II, Item 7A, Quantitative and Qualitative
Disclosure About Market Risk, in AMERCO's Annual Report on Form 10-K
for the fiscal year ended March 31, 1999.
<PAGE> 34
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 24, 1997, five (5) current and/or former Moving Center
General Managers (GMs) and one (1) Area Field Manager (AFM) filed suit
in Marin County Superior Court, Case No. BC 203532, entitled
Sarah Saunders, et al. vs. U-Haul Company of California, Inc., claiming that
- ---------------------- ----------------------------------
they were entitled to be compensated for all overtime hours worked in
excess of forty (40) hours per week. In addition, these Plaintiffs
sought class action status purporting to represent all persons
employed in California as either a salaried GM or AFM since September
1993.
On September 30, 1997, a virtually identical lawsuit was filed in
Los Angeles County Superior Court, Case No. BC 178775, entitled
Wyatt Crandall vs. U-Haul International, Inc. and U-Haul Co. of California.
- -------------- -------------------------------------------------------
This action did not include AFMs, but did purport to be brought on
behalf of GMs and GM trainees.
These cases were consolidated by the Court in Los Angeles on
October 15, 1998. On June 10, 1999, Plaintiff's motion to certify the
AFMs as a class was denied and the motion to certify the GMs as a
class was granted. Notice of class certification was mailed on or
about August 24, 1999. The class opt-out period ended on October 11, 1999.
Trial is set for July, 2000. Management does not expect the Plaintiffs' damage
claims to result in a material loss to AMERCO.
Reference is made to Part I, Item 1, Business, in AMERCO's Annual
Report on Form 10-K for the fiscal year ended March 31, 1999 for a
discussion of certain environmental proceedings.
<PAGE> 35
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
Exhibit No. Description
----------- -----------
3.1 Restated Articles of Incorporation (1)
3.2 Restated By-Laws of AMERCO as of August 27, 1997 (2)
4.1 Senior Indenture dated April 1, 1999 (3)
4.2 Senior Supplemental Indenture dated February 4, 2000 (4)
27 Financial Data Schedule
b. Reports on Form 8-K.
A report on Form 8-K was filed on February 4, 2000 in connection
with AMERCO's issuance of $200,000,000 of 8.80% Notes due 2005.
_____________________________________
(1) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1992, file no. 1-11255.
(2) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1997, file no. 1-11255.
(3) Incorporated by reference to AMERCO's Current Report on Form 8-K dated
April 5, 1999, file no. 1-11255.
(4) Incorporated by reference to AMERCO's Current Report on Form 8-K dated
February 4, 2000, file no. 1-11255.
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
U-Haul International, Inc.
____________________________________
(Registrant)
Dated: February 10, 2000 By: /S/ DONALD W. MURNEY
____________________________________
Donald W. Murney, Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 17,176
<SECURITIES> 0
<RECEIVABLES> 391,955<F1>
<ALLOWANCES> 0
<INVENTORY> 80,581
<CURRENT-ASSETS> 0<F2>
<PP&E> 2,500,965
<DEPRECIATION> 1,164,814
<TOTAL-ASSETS> 3,098,044
<CURRENT-LIABILITIES> 0
<BONDS> 1,101,824
0
0
<COMMON> 10,563
<OTHER-SE> 637,773
<TOTAL-LIABILITY-AND-EQUITY> 3,098,044
<SALES> 148,669
<TOTAL-REVENUES> 1,284,832
<CGS> 87,737
<TOTAL-COSTS> 1,016,506
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,575
<INTEREST-EXPENSE> 61,038
<INCOME-PRETAX> 115,976
<INCOME-TAX> 40,867
<INCOME-CONTINUING> 75,109
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,109
<EPS-BASIC> 2.95
<EPS-DILUTED> 2.93
<FN>
<F1>THE VALUE FOR RECEIVABLES REPRESENTS THEIR AMOUNT NET OF THEIR ALLOWANCES.
<F2>AN UNCLASSIFIED BALANCE SHEET EXISTS IN THE REGISTRANT'S FINANCIAL STATEMENTS.
</FN>
</TABLE>
